During World War I Czarist Russia experienced famine and economic collpse. In February 1917, a provisional government was installed, but it maintained its committment to the war. The provincial government failed to enact land reforms demanded by the pesantry, who accounted for over 80% of the population. Within the military, mutiny was pervasive among conscripts and the intelligentsia was disaffected over the slow pace of reforms. Poverty, income disparities and inequality were growing while the provisional government grew more autocratic and appeared on the brink of a miliary coup. Conditions in urban areas were thus fertile ground for revolution.

During the revolution, the Bolsheviks had adopted the popular slogans, "all power to the Soviets!" (councils; the bodies of direct popular democracy, although they held no official position of power in the Provincial government) and "land, peace, and bread!". Moreover, after the revolution, the party leadership devised a constitution that appeared to recognize the authority of the local Soviets. The highest legislative body was the Supreme Soviet. The highest executive body was the Politburo. (More about the political organization of the USSR can be found on Organization of the Communist Party of the USSR.)

The first leader of the Soviet Union was Vladimir Lenin, who had led the Bolsheviki faction of Communists during the Revolution of 1917. One of the first acts of the Communist government was to withdraw from World War I (following the peace Treaty of Brest-Litovsk, the Soviet Union turned over most of the area of the Ukraine and Belarus to Germany). Immediately, however, supporters of the Czarist regime broke out in revolt, resulting in years of all-out civil war, which lasted until 1922. Known as the "whites", these forces were aided by Western intervention. Allied armies led by the United States, Great Britain, and France, seeking to prevent the spead of Communism or Russia's exit form the war effort, attempted to invade the Soviet Union and support forces hostile to the Bolsheviks with the intention of overthrowing the Soviet regime.

The Bolsheviks, later the Communist Party of the Soviet Union (CPSU), initially enjoyed only a tenuous, precarious hold on power and were divided among themselves on tactics and from portions of their own party rank and file on some policy issues. Despite these problems, they quickly consolidated their hold on state power over progressively larger portions of the country, and enacted laws prohibiting any effective rival political party.

Prior to the revolution, the Bolshevik doctrine of "democratic centralism" argued that only a tightly-knit and secretive organization could successfully overthrow the government; after the revolution, they argued that only such an organization could prevail against foreign and domestic enemies. Fighting the civil war would actually force the party to put these principals into practice. Arguing that the revolution needed not a mere parliamentary organization but a party of action which would function as a scientific body of direction, a vanguard of activists, and a central control organ, Lenin banned factions within party. He also argued that the party should be an elite body of professional revolutionists dedicating their lives to the cause and carrying out their decisions with iron discipline, thus moving toward toward putting loyal party activists in charge new and old political institutions, army units, factories, hospitals, universities, and food suppliers. Against this backdrop, the nomenklatura would evolve and become standard practice.

In theory, this system was to be democratic since all leading party organs elected from below, but also centralized since lower bodies would be accountable to higher organizations. In practice, "democratic centralism" was more centralist, with decisions of higher organs binding on lower ones. Over time, party cadres would grow increasingly careerist and professional. Party membership required exams, special courses, special camps, schools, and nominations by three existing members.

In December 1917, the Cheka was founded as the Bolshevik's first internal security force. Later it changed names to GPU, OGPU, MVD, NKVD and finally KGB. These "secret police" were responsible for finding those viewed by the party as counter-revolutionary and expelling them from the party or bringing them to trial.

During the Civil War (1917-1921), Lenin adopted "War Communism," which entailed the breakup of the landed estates and the forcable seizure of agricultural surplues. The Kronstadt revolt signaled the growing unpopularity of War Communism in the countryside: in March 1921, at the end of the civil war, disillusioned sailors, primarily peasants who initially had been stalwart supporters of the Bolsheviks under the provisional government, revolted against the new regime. Although the Red Army, commanded by Leon Trotsky, crossed the ice over the frozen Baltic Sea and quickly crushed the rebellion, this sign of growing discontent forced the Party under Lenin's direction to foster a broad alliance of the working class and peasantry (80% of the population), although orthodox Marxist-Leninists favored a regime solely representative of the interests of the revolutionary proletariat. Lenin consequently ended War Communism and instituted the New Economic Policy (NEP), in which the state allowed a limited market to exist. Small private businesses were allowed and restrictions on political activity were somewhat eased.

However, the key shift involved the status of agricultural surpluses. Rather than requisitioning agricultural surpluses by force (the hallmark of War Communism), the NEP allowed peasants to sell their surplus yields on the open market. Meanwhile, the state still maintained the nationalization of what Lenin deemed the "commanding heights" of the economy (heavy industry such as the coal, iron, and metallurgical sectors along with the banking and financial components of the economy), which employed the majority of the workers in the urban areas. However, state industries would be profit-maximizing and largely free to make their own economic decisions.

The Soviet NEP (1921-29) was essentially a period of "market socialism" quite similar to the Dengist reforms in Communist China after 1978 in that both foresaw a role for private entrepreneurs and markets based on trade and pricing rather than centralized planning. As an interesting aside, during the first meeting in the early 1980s between Deng Xiaoping and Armand Hammer[?], a US industrialist and prominent investor in Lenin's Soviet Union, Deng pressed Hammer for as much information on the NEP as possible.

With new market incentives to raise productivity, agricultural yields not only recovered to the levels attained before the Bolshevik Revolution, but greatly improved. The break-up of the quasi-feudal landed estates of the Czarist-era countryside gave peasants their greatest incentives ever to maximize production. Now able to sell their surpluses on the open market, peasant spending gave a boost to the manufacturing sectors in the urban areas. As a result of the NEP, and the breakup of the landed estates while the Communist Party was consolidating power between 1917-1921, the Soviet Union became the world's greatest producer of grain.

Agriculture, however, would recover from civil war more rapidly than heavy industry. Factories, badly damaged by civil war and capital depreciation, were far less productive. In addition, the organization of enterprises into trusts or syndicates representing one particular sector of the economy would contribute to imbalances between supply and demand associated with monopolies. Due to the lack of incentives brought by market competition, trusts were likely to sell their products at higher prices.

The slower recovery of industry would pose some problems for the peasantry, who accounted for eighty percent of the population. Since agriculture was relatively more productive, relative price indexes for industrial goods were higher than those of agricultural products. The outcome of this was what Trotsky deemed the "Scissors Crisis" because of the scissors-like shape of the graph representing shifts in relative price indexes. Simply put, peasants would have to produce more grain to purchase consumer goods from the urban areas. As a result, some peasants witheld agricultural surpluses in anticipation of higher prices, thus contributing to mild shortages in the cities. This, of course, is normal, speculative market behavior, but some top Communist Party cadres, with little understanding of market economics, did not understand this phenomenon, considering it to be exploitative of urban consumers.

In the mean time the Party took constructive steps to offset the crisis, attempting to bring down prices for manufactured goods and stabilize inflation, by imposing price controls on key industrial goods and breaking-up the trusts in order to foster market completion.

However, the radical or leftwing of the Party, led by Trotsky, who long opposed the NEP for ideological reasons, exploited the "Scissors Crisis" to gain ideological capital over the moderate wing of the party supportive of the NEP, led by Nikolai Ivanovich Bukharin. Initially, Stalin united with the Bukharinite faction of the Party to defeat Trotsky. But he eventually tuned against the moderates who favored the NEP once Trotsky was exiled in order to consolidate his control over the party and the state.

In order to devise a pretext for abandoning the NEP, Stalin himself would move on the exploited the problems associated with the "Scissors Crisis". Moreover, he pointed to the rise of the Nepmen (small retailers profiting off the flourishing urban-rural trade) and Kulaks (the emerging middle class of peasant farmers) under the NEP as new capitalistic classes hostile to the Party's monopoly on power. Since the NEP economy was a mixed economy, he was also able to point to inflation and unemployment as the evils of the market.

Since succession mechanisms had not grown regualrized in party procedure, Lenin's death in 1924 heightened the fierce political battle between factions in the party hostile and supportive of the NEP. Stalin eventually shifted from side to side and eventually rid the party of both factions by forging a path of development that integrated the ideas of both camps. He adapted the leftist (hard-line) stance opposing agricultural production governed by private economic decision-making, which would entail the liquation of the Kulaks and Nepmen as classes and rapid industrialization by the brutal harnessing of labor and capital, favored by the ideologues as an attempt to produce the material basis of communism quickly under unfavorable conditions. But he also endorsed the rightist (pragmatist) notion of "socialism in one country", which favored concentrating on economic development rather than exporting revolution. In that respect, he also favored extensive exports of grain and raw materials, thereby which the Soviet Union could attain the revenues from foreign exchange to import foreign technologies need for industrial development.

By then, Stalin had a reputation as a revolutionary, "devoted Bolshevik," and Lenin's "right hand man". However, in reality Lenin had distrusted Stalin, and before his death had written a letter warning against giving power to Stalin, calling him "rude" "intolerant" and "capricious". Stalin and his supporters had covered this letter up, which only came to light after Stalin's death in 1953.

At the Fifteenth Party Congress in December of 1927, Stalin, now an unchallengeable dictator, abandoned the NEP. Warning delegates of an impending capitalist encirclement, he stressed that survival and development could only occur by pursuing the rapid development of heavy industry[?]. Stalin remarked that the Soviet Union was "fifty to a hundred years behind the advanced countries" (the United States, France, Germany, Great Britain, etc.), and thus must narrow "this distance in ten years". In a perhaps eerie foreboding of World War II, Stalin declared, "Either we do it or we shall be crushed". Stalin's abandonment of the NEP with the first Five-Year Plan drafted by GOSPLAN[?] in 1929 was the key turning point in Soviet history, establishing central planning geared toward rapid heavy industrialization as the basis of economic decision-making.

To oversee the radical transformation of the Soviet Union, the party, under Stalin's direction, established GOSPLAN[?] (the State General Planning Commission), a Communist Party organ responsible for guiding the socialist economy toward accelerated industrialization. In April 1929 GOSPLAN released two joint drafts that began the process that would industrialize the primarily agrarian nation. This 1700 page report became the basis the first Five Year Plan for National Economic Construction, or "Piatiletka", calling for the doubling of Soviet capital stock between 1928 and 1933. Shifting from Lenin's NEP, the First Five Year Plan would begin the rapid, incredible process of transforming a largely agrarian nation consisting of peasants and emerging from Czarist absolutism into an industrial superpower. In effect, the initial goals were laying the foundations for future, exponential economic growth.

Brief Overview of Economic Planning

The new economic system put forward by the first Five-Year plan entailed a complicated series of planning arrangements. In an ideal plan, the Politburo sent its list of priorities for the Five-Year Plan to the Council of Ministers, which elaborated them and sent them to the State Planning Commission or GOSPLAN[?], which disaggregated the priorities to its own departments. The departments worked out the drafts of the parts of the plan, which were re-aggregated into a full draft by GOSPLAN[?]. This draft of the plan would be sent to the Council of Ministers and to the Party's Politburo and Central Committee Secretariat. The Council of Ministers then disaggregated the plan into task by ministry, then by lower units, eventually to the enterprise level. Enterprises then assesed the feasibility of targets and estimated needed inputs, which was the most intense bargaining phase of planned economic decision-making. Estimates after this bargaining process were re-aggregated to the Council of Ministers, which sent the revised estimates to the State Planning Commission (GOSPLAN). The redrafted plan was then sent to the Council of Ministers and the Party's Politburo ad Central Committee Secretariat for approval. The Council of Ministers submited the Plan to the Supreme Soviet (the rubber-stamp Parliament) and the Central Committee submits the plan to the National Party Congress, both for rubber stamp approval. By the time this process is completed, the plan became law.

The first Five-Year plan focused on the mobilization of natural resources to build up the country's heavy industrial base by increasing output of coal, iron, and other vital resources. At a high human cost, this process was largely successful, forging a capital base for industrial development more rapidly than any country in history. However, as the economy grew more complex in the post-Stalin years, the prudence of planned economic decision-making would prove less apt at attaining growth through technological innovation and improvements in productivity, thus resulting in the stagnation associated with the later years prior to the dissolution of the Soviet Union.

Collectivization and Industrialization in Practice

Under the NEP, the abandonment of the War Communist (1917-21)-era requisitioning of agricultural surpluses gave peasants individual incentives to improve agricultural productivity by allowing them to sell their surpluses to the state on the open market. The process of collectivization[?], however, overseen by the first Five-Year Plan, abandoned this policy. Instead, peasants were force to give up their private plots of land and property, and work for a collective farm, and be forced to sell their produce for an artificially low price that had been set by the state.

Now that the state was able to seize agricultural surpluses, it would be able to export grain to attain the necessary foreign exchange revenues needed to import technologies necessary for heavy-industrialization. However, peasants bitterly opposed this process and in many cases peasants destroyed their animals rather than give them to collective farms. Because of this, collectivization led to a drop in the high productivity of Russian farming achieved during the NEP years, which did not regain the NEP level until 1940, or allowing for the further disasters of World War II. Perhaps the state would have been able to export more grain on the foreign market had it not even gone through with this disastrous process. Moreover, collectivization worsened famine conditions during a time of drought, particularly in the Ukraine. The number of people who died in these famines is estimated at between two and five million. The number of casualities, however, is bitterly disputed to this day.

However, the mobilization of resources by state planning augmented the county's industrial base. Pig iron output, necessary for development of nonexistent industrial infrastructure rose from 3.3 million to 10 million tons per year. Coal, the integral product fueling modern economies and Stalinist industrialization, successfully rose from 35.4 million to 75 million tons, and output of iron ore rose from 5.7 million to 19 million tons. Other examples of the effectiveness of early socialist development were complexes such as Magnitogorsk[?] and Kuznetsk[?], the Moscow and Gorky[?] automobile plants, the Urals and Kramatorsk heavy machinery plants, and Kharkov, Stalingrad and Cheliabinsk tractor plants either built or under construction.

Based largely on these figures the Five Year Industrial Production Plan had been fulfilled by 93.7 percent in only four years, while parts devoted to heavy-industry part were fulfilled by 108%, explaining why Stalin in December 1932 declared the plan a success to the Central Committee, since increases in the output of coal and iron would fuel future development. Some historians even suggest that the first Plan could have been even more successful if the USSR had not confronted foreign crisis beyond its control.

According to Robert C. Tucker[?], Stalin's program was under-fulfilled by a mere 6 percent "only because the refusal of nonaggression pacts by neighboring countries and complications in the Far East", such as the Japanese occupation of Chinese Manchuria in 1931, which foreshadowed war and forced the USSR to convert some plants to munitions production to meet gaps in defense potential.

While undoubtedly marking a tremendous leap in industrial capacity, the Five Year Plan was, of course, extremely harsh on industrial workers; quotas were extremely difficult to fulfill, requiring that miners put in 16 to 18-hour workdays, and working conditions were poor, even hazardous. By some estimates, 127,000 workers died during the four years (from 1928 to 1932). Due to the allocation of resources for industry along with decreasing productivity since collectivization a famine occurred. The use of forced labor must also not be overlooked either. In the construction of the industrial complexes, prisoners were used as expendable resources. The quotas were so repressive that the failure to fulfill them could result in treason charges, and exile to the GULAGs.

From 1921 until 1954, during the period of state-guided, forced industrialization, it is claimed 3.7 million people were sentenced for alleged counter-revolutionary crimes, including 0.6 million sentenced to death, 2.4 million sentenced to prison and labor camps, and 0.8 million sentenced to expatriation. Although some estimates put these figures much higher. Much like with the famines, the evidence supporting these statistics4 is disputed by some historians, although this is a minority view.

Changes in Soviet Society: Modernization

Stalin's industrial policies largely improved living standards for the majority of the population, although the debated amount of casualities resulting from Stalinist policies taints the Soviet record.

Employment, for instance, rose greatly; 3.9 million per year was expected by 1923, but the number was actually an astounding 6.4 million. By 1937, the number rose yet again, to about 7.9 million, and in 1940 it was 8.3 million. Between 1926 and 1930, urban population increased 30 million. Unemployment had been a problem during the time of the Czar and even under the NEP, but it was not a major factor after the implementation of Stalin's industrialization program. The mobilization of resources to industrialize the agrarian society industrial created a need for labor, meaning that the unemployment went virtually to zero. Several ambitious projects were begun, and they supplied raw materials not only for military weapons but also for consumer goods.

The Moscow and Gorky[?] automobile plants produced automobiles that the public could utilize, and the expansion of heavy plant and steel production made production of a greater number of cars possible. Car and truck production, for example, reached 200,000 in 1931. Because the industrial workers needed to be educated, the number of schools[?] increased. In 1927, 7.9 million students attended 118,558 schools. This number rose to 9.7 million students and 166,275 schools by 1933. In addition, 900 specialist departments and 566 institutions were built and functioning by 1933.

The Soviet people also benefited from a degree of social liberalization. Females were given an adequate, equal education and women had equal rights in employment, precipitating improving lives for women and families. Stalinist development also contributed to advances in health care, which vastly increased the lifespan for the typical Soviet citizen and the quality of life. Stalin's policies granted the Soviet people universal access to health care and education, allowing this generation to be the first not to fear typhus, cholera, and malaria. The occurrences of these diseases dropped to record-low numbers, increasing life spans by decades.

Soviet women under Stalin were also the first generation of women able to give birth in the safety of a hospital, with access to prenatal care. Education was also an example of an increase in standard of living after economic development. The generation born during Stalin's rule was the first near-universally literate generation. Engineers were sent abroad to learn industrial technology, and hundreds of foreign engineers were brought to Russia on contract. Transportation was also improved, as many new railways were built. Workers who exceeded their quotas, Stakhanovites, received many incentives for their work. They could thus afford to but the goods that were mass-produced by the rapidly expanding soviet economy.

Of course, these overall gains were not universal. Kulaks, prosperous peasants, were exiled to Siberia as political prisoners (a large portion of the kulaks served as forced labor). In 1975, Abramov[?] and Kocharli[?] estimated that 265,800 kulak families were sent to the GULAG in 1930. In 1979, Roy Mendvedev[?] used the Abramov's and Kocharli's estimate to calculate that 2.5 million peasants were exiled between 1930 and 1931, but he suspected that he underestimated the total number. Tragically, Siberia was both sparsely populated and the site of most of the Soviet Union's natural resources. Prison labor, in large measure, explains the Soviet Union's amazingly high output levels of key natural resources during the early stages of industrial development.

The Great Purges

While this process was unfolding, Stalin consolidated near-absolute power afterwards with the Great Purges against his suspected political and ideological opponents, most notably the old cadres and the rank and file of the Bolshevik Party. This recent consolidation of power might have been necessitated considering the level of discontent resulting from collectivization of agriculture. Measures used against opposition and suspected opposition ranged from imprisonment in work camps (Gulags) to assassination (such as that of Leon Trotsky and possibly Sergei Kirov). The period between 1936-1937 is often called the Great Terror[?] when thousands of people even suspected of opposing Stalin's regime were killed or imprisoned, Stalin is reputed to have personally signed 40,000 death warrants of suspected political opponents.

During this period, the practice of mass arrest, torture, and imprisonment or execution without trial, of anyone suspected by the secret police of opposing Stalin's regime became commonplace. By the KGB's own estimates, 681,692 people were shot during 1937-38 alone (although many historians think that this was an undercount), and millions of people were transported to Gulag work camps.

Several show trials were held in Moscow, to serve as examples for the trials that local courts were expected to carry out elsewere in the country. There were four key trials from 1936 to 1938, The Trial of the Sixteen was the first (December 1936); then the Trial of the Seventeen (January 1937); then the trial of Red Army generals, including Marshal Tukhachevsky (June 1937); and finally the Trial of the Twenty One (including Bukharin) in March 1938.

In spite of the Stalin's seemingly progressive constitution, enacted in 1937, the Party's power was in reality subordinated by the secret police, the mechanism whereby Stalin secured his dictatorship through state terror.

Heavy-industrialization contributed to the Soviet Union's wartime victory over Nazi Germany. The Red Army overturned the Nazi eastern expansion single-handedly, with the turning point on the Eastern Front being the Battle of Stalingrad. Although the Soviet Union was getting aid and weapons from the United States, its production of war materials was greater than that of Germany because of rapid growth of Soviet industrial production during the interwar years. The Second Five Year Plan raised the steel production to 18 million tons and the coal to 128 million tons. Before it was interrupted, the Third Five Year Plan produced 18 millions of steel and 150 million tons of coal. During the war, the allies were able to outstrip Germany in the production of war materials, in some cases ten-fold. The tank production, for example, was equal to 40,000 per year for the allies, to only 4,000 for Germany.

While naïve to de-emphasize US assistance in World War II, the Soviet Union's industrial output helped stop the German's initial advance, and stripped them of their advantage. According to R. Hutchings[?], "One can hardly doubt that if there had been a slower buildup of industry, the attack would have been successful and world history would have evolved quite differently." For the laborers involved in industry, however, life was difficult. Workers were encouraged to fulfill and overachieve quotas through propaganda, such as the Stakhanovite movement. Between 1933 and 1945, some argue that seven million civilians died because of the demanding labor. Between 1930 and 1940, 6 million were put through the forced labor system.

Anti-Soviet historians, however, interpret the lack of preparedness of the Soviet Union to defend itself as a flaw in Stalin's economic planning. Shearer[?] argues that there was "a command-administrative economy" but it was not "a planned one". He argues that the Soviet Union suffered from a chaotic state of the Politburo in its policies due to the Great Purges, and was completely unprepared for the German invasion. When the Soviet Union was invaded in 1941, Stalin was indeed surprised. Economist Holland Hunter[?], in addition, argues in his Overambitious First Soviet Five-Year Plan, that an array "of alternative paths were available, evolving out of the situation existing at the end of the 1920s... that could have been as good as those achieved by, say, 1936 yet with far less turbulence, waste, destruction and sacrifice."

While by no means an "orderly" economy or an efficient one, the Five Year Plans did plan an offensive, but since the Soviet Union was under attack, the situation required a defensive response. The result, as Shearer points out, was that the command economy had to be relaxed so that the mobilization needed was achieved. Sapir supports this view, arguing that Stalin's policies developed a mobilized economy (which was inefficient), with tension between central and local decision-making. Market forces became more significant than central administrative constraints. This view, however, is refuted by Stephen Lee[?], who argues that Soviet Union's "heavy industrialization translated into ultimate survival."

Right: Marking the Soviet Union's victory, a soldier raises the Soviet flag over the German Reichstag (parliament) in the Nazi capital, Berlin.

On June 22nd1941, however, Hitler broke the pact and invaded the Soviet Union (see Operation Barbarossa). It is said that Stalin at first refused to believe Germany had broken the treaty. However, new evidence shows Stalin held meetings with a variety of senior Soviet government and military figures, including Molotov (People's Commissar for Foreign Affairs), Timoshenko[?] (People's Commissar for Defense), Zhukov (Chief of Staff of the Red Army), Kuznetsov (Commander of both North Caucasus and Baltic Military Districts), and Shaposhnikov[?] (Deputy People's Commissar for Defense). All in all, on the very first day of the attack, Stalin held meetings with over 15 individual members of the Soviet government and military apparatus.5

It is claimed by some that Germany received notice of a planned attack by the Soviet Union. Some Russian military men as well have recently stated that Stalin's Red Army was in offensive position and ready to strike Germany.

The Germans reached the outskirts of Moscow in December 1941, but were stopped by an early winter and a Soviet counter-offensive. At the battle of Stalingrad in 1942-43, after losing an estimated 1 million men in the bloodiest battle in history, the Red Army was able to regain the initiative of the war. The Soviet forces were soon able to regain their lost territory and push their over-stretched enemy back to Germany itself.

From the end of 1944 to 1949 large sections of eastern Germany came under the Soviet Union's occupation and on May 2nd 1945, the capital city Berlin was taken, while over fifteen million Germans were removed from eastern Germany and pushed into central Germany (later called GDR German Democratic Republic) and western Germany (later called FRG Federal Republic of Germany). Russians, Ukrainians, Poles, Czech etc. were then moved onto German land.

The Soviets bore the brunt of World War II and the West did not open up a second front in Europe until D-Day. Approximately 21 million Soviets, among them 7 million civilians, were killed in "Operation Barbarossa", the invasion of the Soviet Union by Germany. Civilians were rounded up and burned or shot in many cities conquered by the Nazis. Many feel that since the Slavs were considered "sub-human", this was ethnically targeted mass murder. However, the retreating Soviet army was ordered to pursue a 'scorched earth' policy whereby retreating Soviet troops were ordered to destroy Russian civilian infrastructure and food supplies so that the German troops could not use them.

As mentioned, the Soviets bore the heaviest casualties of World War II. These war causalities can explain much of Russia's behavior after the war. The Soviet Union continued to occupy and dominate Eastern Europe as a "buffer zone" to protect Russia from another invasion from the West. Russia had been invaded three times past 150 years before the Cold War during the Napoleonic Wars, World War I, and World War II, suffering tens of millions of causalities.

After Stalin's death, Khrushchev shocked delegates to the 20th Party Congress[?] on February 23, 1956 by publicly denouncing the "cult of personality" that surrounded Stalin, and accusing Stalin of mass murder during the Great Purges. This effectively alienated Khrushchev from the more conservative elements of the Party. He became Premier on March 27, 1958 after a long and complex series of maneuvers, notably the crucial removal of Stalin's obvious successor, Beria, head of the KGB. Even before this watershed speech, however, the new leadership declared an amnesty for some serving prison sentences for crimial offences, announced price cuts, and relaxed the restrictions on private plots. The ten-year period that followed Stain's death also witnessed the reassertion of political power over the means of coercion. The party became the dominant institution over the secret police and army. Effectively overnight, Stalin's death freeded the Soviet people from his apparatus of state terror, thus reducing the role of prison labor in the economy.

Khrushchev, who had outmaneuvered his Stalinist rivals, was regarded by his political enemies, many of whom belonged to the new conservative generation of rising technocrats, as a boorish, uncivilized peasant, with a reputation for interrupting speakers to insult them. In one famous incident at a United Nations conference in 1960, Lorenzo Sumulong[?], the Filipino delegate, asked Khrushchev how he could protest Western capitalistimperialism while the Soviet Union was at the same time rapidly assimilating Eastern Europe. Khrushchev became enraged and informed Sumulong that he was, "a jerk, a stooge and a lackey of imperialism," then removed one of his shoes and banged it on the table several times for emphasis. The Politburo was mortified.

Khrushchev was deposed in 1964, due largely to the Cuban missile crisis and his personal mannerisms, both of which were regarded by the Party as tremendous embarassments on the international stage, and his reformist posture on some issues of central economic planning, which alarmed many entrenched interests. After seven years of house arrest, Khrushchev died at his home in Moscow, USSR (now Russia) on September 11, 1971. He is interred in the Novodevichy Cemetery, Moscow, Russia.

When the First Five-Year Plan drafted by GOSPLAN[?] established centralized planning as the basis of economic desision-making, the Soviet Union was still largely an agrarian nation lacking the complexities of a highly industrialized one. Thus, its goals, namely augmenting the country's industrial base, were those of extensive growth or the mobilization of resources. At a high human cost, due in large party to prison labor, and the effective militarization of factories, the Soviet Union forged a modern, highly industrialized economy more rapidly than any other nation beforehand. By the 1970s, the Soviet Union was a complex industrialized society with an intricate division of labor and with complex interconnection of industries over a huge geographical expanse that had reached military parity with the Western powers.

During the early Brezhnev years following 1964, the ACS economy still had not yet exhasted its capacity for growth. The Soviet Union improved living standards by doubling urban wages and raising rural wages by around 75%, building millions of one-family apartments, and manufacturing large quantities of consumer goods and home appliances. Under his tutelage, industrial output also increased by 75%, and the Soviet Union became the world's largest producer of oil and steel. The twenty years following Stalin's death in 1953 were the best period in the history of Russia for the ordinary citizen in terms of rising living standards, stability, and peace. Terror, famines, and world war were only horrific memories while the tide of history appeared to be turning in favor of the Soviet Union. The United States was mired in economic recession resulting from the OPEC oil embargo, inflation caused by excessive government expenditures for the Vietnam War, and not to mention the wartime quagmire. Meanwhile, pro-Soviet regimes were making great strives abroad, especially in the Third World. Vietnam had defeated the United States, becoming a united, independent state under a Communist government while other Communist governements and pro-Soviet insurgencies were spreading rapidly across Africa, Southeast Asia, and Latin America.

But during late Brezhnev years the economy began to stagnate and the population increasingly began demanding greater quantities of quality goods than the economy could produce. Plan quotas (control figures) for enterprises, of course, were fulfilled on the basis of output, not quality. In the past, shoddy goods were more acceptable when access to consumer goods was so limited. But with ever-improving living standards and with the growth of a new middle class since de-Stalinization, shortages of shoddy goods grew increasingly unacceptable. Supply shortages were not helped by the insistence on raising wages while keeping prices down at artificially-low administratively-set levels either.

Intensive growth (growth to improvements in productivity), in contrast to the extensive growth (mobilization of capital and labor) achieved under Stalinist industrialization, would prove to be the disadvantage to centrally directed economic decision-making. As the Soviet economy grew more complex, as it required more and more complex disaggregation of control figures (plan targets) and factory inputs, and as it required more communication between the enterprises and the planning ministries, and as the number of enterprises, trusts, and ministries multiplied, it increasingly suffered from a systemic inability to respond to change, adapt new technologies, and provide incentives at all levels to improve growth, productivity and efficiency.

At the enterprise level, managers not only lacked the incentives to improve productivity found in market economies, but often had incentives not to over-fulfill plan targets by as much as possible. For one, there was a tendency to overstate capacity in order to bargain for more advantageous plan targets or control figures with the ministries (targets that, of course, would be easier to implement). Faulty communication, more of a problem as the economy grew larger and more complex, would reverberate throughout the economy, distorting supply and demand figures for inputs in interconnected industries. Moreover, managers were often more preoccupied by institutional careerism than improving productivity. They received fixed wages and only received incentives for plan fulfillment on the basis of job security, bonuses, and benefits like special clinics and private dachas. Managers received such benefits when targets were over-fulfilled, but when, for instance, they were greatly over-fulfilled, they only saw their control figures increased. Hence, there was an incentive to exceed targets, but not by much. This effect was known as the "rachet effect." Prominent American specialists on the Soviet economy Paul Gregory[?] and Robert Stuart[?] emphasize these points.

Planning was also very rigid; plant managers were not able to deviate from the plan and were allocated certain funds for certain capital and labor inputs. As a result, plant managers could not improve productivity by laying-off unnecessary workers due to such labor controls. There was substantial underemployment due to such rigidities by the plans devised during collective bargaining between enterprises and ministries.

And there was a systemic lack of incentives to improve productivity through technological innovation. If the production process were more efficient because of the introduction of new technology, enabling the same process to require less inputs or less labor, it would just result in lower administratively-set prices rather than prices set by a profit-maximizing equilibrium of supply and demand. In other words, improved productivity through technological innovation would do little to make the industry more profitable for those who had a stake in it.

Meanwhile, due to the realities of the Cold War, the Soviet Union, with its historically much smaller productive capabilities than those of the West, faced a disproportionate burden in the arms race, having to devote a much relatively higher segment of its economy to military expenditures to reciprocate those of the West. Before the Cold War, long-standing disparities in the productive capacities, developmental levels, and geopolitical strength existed between East and West. The "East", in many respects, had been behind the "West" for centuries. As a result, reciprocating Western military build-ups during the Cold War placed an uneven burden on the Soviet economy, forcing them allocate a disproportionately large share of their resources to the defense sector. The burden of the Cold War, in conjunction with the growing impracticality of centrally-administered economic decision-making as the economy grew larger and more complex, would lead to a huge imbalance between supply and demand for consumer goods in the Soviet Union's late years.

As mentioned, the Khrushchev and Brezhnev years saw great concessions to consumers, enabling the Soviet people to reap the benefits of the Soviet Union's industrialization during the Stalin years. But as the purchasing power of Soviet workers increased, the products that they demanded were in an ever-shorter supply. Although wages for workers were relatively high, workers were often unable to purchase the products that they demanded because of systemic supply shortages caused by the stagnation of the Soviet economy once it had industrialized and reached a high level of complexity. Many workers thus began accumulating large surpluses at Gosbank, which operated as what would be a state bank and a commercial bank in a market economy. These surpluses would be wiped out after the dismantling of the Soviet economy when price and currency controls were abruptly lifted in 1992.

Calls for Reform

Although economic stagnation was pronounced by the time Gorbachev became party chief in 1985, the sluggishness of the Soviet Union's command economy was evident two decades earlier amid calls for reform. Following Khrushchev's ouster in 1964, however, the reform movement high up party ranks was perhaps weakened by the growing power of the ministries and collective leadership. As the political atmosphere gradually moved toward becoming more relaxed since de-Stalinization, a pattern of collective leadership emerged that reconciled the interests of many different bureaucracies and interest groups. In contrast to the system of of delegated power in the post-Communist years, Soviet politics under Brezhnev was generally based on informal personal influence that a cadre accumulated over some particular institutions and compromise between committee members.

Known as "bureaucratic pluralism" by Western Sovietologists, this dyanamic of politics has been used to explain the aborted Kosygin[?] Reforms of 1965, which called for giving industrial enterprises more control over their own production-mix, some flexibility over wages, and allowed them to put a proportion of profit into their own funds. Since these reforms suggested a move away from detailed central planning and control from above, the planning ministries, whose numbers were proliferating rapidly, fought back and protected their old powers. This was not a difficult task since the Brezhnev/Kosygin collective leadership lacked the strength to counter their influence (the ministries, after all, controlled supplies and rewarded performance) in order to implement the reforms. The ministries curtailed them by just issuing more detailed instructions that retarded the reforms, impeding the freedom of action of the enterprises. Nor did these economic reforms, aimed at increasing productivity by pushing aside surplus labor, necessarily appeal to workers. The constituency that stood to gain the most from the reforms was the enterprise management, but they weren't enthusiastic either since they weren't convinced that these reforms might last. Finally, by 1968 there was the unfortunate example of the Prague Spring in Czechoslovakia, which put the brakes on the momentum for economic and political reform. In contrast, the military sector continued to be the success story.

Due to continued growth rates, some Sovietologists have argued that the ACS system had not yet exhausted its capacity for growth by the late 1960s since it was still sustaining higher rates of growth than the Western powers. In light of this, it has been argued that the Kosygin[?] Reforms of 1965 could have been implemented at just the right time to save the Soviet Union and spare the population of the hardships of the past twenty years. By the Gorbachev era (1985-1991), in contrast, a decade of stagnation, declining productivity, and systemic problems down to the factory level might have been insurmountable. Perhaps the problem with the Kosygin/Brezhnev collective leadership was not too much power concentrated in their hands, but not enough. Forces like the ministries and the military won out, pushing the Soviet Union in a less prudent direction.

However, following the dissolution of the Soviet Union in 1991, Yeltsin was a strong executive with strong formal delegated powers able to implement radical (and unpopular) economic reforms under his leadership by executive decree and unconstitutional actions like his dissolution of the Duma in 1993. Kosygin, then the Soviet Premier, however, could not get the Byzantine labyrinth of the Soviet Administrative Command System to carry out the reforms that he attempted to institute. Unlike Stalin, they simply did not have his apparatus of state terror in place, which enabled Stalin to subvert the party's authority with the secret police.

Perestroika and Glasnost Introduced

Although reform stalled between 1964-1982, the generational shift gave new momentum for reform. Changing relations with the United States might also have been an impetus for reform. By the Reagan years in the United States, the abandonment of Détente would force the Soviets to greatly improve their productive capabilities in order to reciprocate the new arms build-up, especially amid talks of "star wars" missile defense. By the time Gorbachev would usher in the process that would lead to the political collapse of the Soviet Union and the resultant dismantling of the the Soviet Administrative Command System with Glasnost (political openness) and Perestroika (economic restructuring), the Soviet economy suffered from both hidden inflation and pervasive supply shortages.

Gorbachev has accused Boris Yeltsin, his old rival and Russia’s first post-Soviet president, of tearing the country apart out of a desire to advance his own personal interests.

Gorbachev instituted a number of political reforms under the name of Glasnost, these included relaxing censorship and political repression, reducing the powers of the KGB and democratisation. The reforms were intended to break down resistance against Gorbachev's economic reforms, by conservative elements within the Communist Party. Under these reforms, much to the alarm of party conservatives. Competitive elections were introduced for the posts of officials (by people within the communist party).

Gorbachev's relaxation of censorship and attempts create more political openness. However had the unintended effect of re-awakening long surpressed nationalist and anti-Russian feelings in the Soviet Union's constituent republics. During the 1980s calls for greater independence from Moscow's rule grew louder, this was especially marked in the Baltic republics of Estonia, Lithuania and Latvia which had been annexed into the Soviet Union by Stalin in 1940. Nationalist feeling also took hold in other Soviet republics such as the Ukraine and Azerbaijan. These nationalist movements were strengthened greatly by the declining Soviet economy, whereby Moscow's rule became a convenient scapegoat for economic troubles. Gorbachev had accidently unleashed a force that would ultimately destroy the Soviet Union.

On February 15, 1989 Soviet forces completed their withdrawal from Afghanistan. The Soviet Union continued to support the communist Democratic Republic of Afghanistan with substantial aid until the end of 1991. In 1989 the communist goverments of the Soviet Union's satelite states were overthrown one by one with feeble resistance from Moscow.

By the late 1980s the process of openess and democratisation began to run out of control, and went far beyond what Gorbachev had intended. In elections to the regional assemblies of the Soviet Unions costituent republics, nationalists swept the board. As Gorbachev had weakened the system of internal political repression, the ability of the USSR's central Moscow government to impose its will on the USSR's constituent republic had been largely undermined.

On February 7, 1990 the Central Committee of the Soviet Communist Party agreed to give up its monopoly of power. The USSR's constituent republics began to assert their national sovreignty over Moscow, and started a "war of laws" with the central Moscow government, this involved the governments of the constituent republics repudiating all-union legislation where it conflicted with local laws, asserting control over their local economies and refusing to pay tax revenue to the central Moscow government. This strife caused economic dislocation, as supply lines in the economy were broken, and caused the Soviet economy to decline further.

Gorbachev made desparate and ill-fated attempts to assert control, notably in the Baltic states, but the power and authority of the central government had been dramatically and irreversably undermined. On March 11, 1990, Lithuania declared independence and pulled out of the union. However, a large part of the population of the Lithuanian SSR[?] comprised ethnic Russians, and the Red Army had a strong presence there. The Soviet Union initiated an economic blockade of Lithuania and kept troops there "to secure the rights of ethnic Russians." In January1991, clashes between Soviet troops and Lithuanian civilians occurred, leaving 20 dead. This further weakened the Soviet Union's legitimacy, internationally and domestically. On March 30, 1990, the Estonian supreme council declared Soviet power in Estonia since 1940 to have been illegal, and started a process to re-establish Estonia as an independent state.

Also amongst Gorbachev's reforms, was the introduction of a directly elected president of the RSFR[?] (Russia). The election for this post was held in June 1991. The populist candidate Boris Yeltsin, who was an outspoken critic of Mikhail Gorbachev won 57% percent of the vote, and humiliated Gorbachev's prefered candidate, Former Prime Minister Ryzhkov, who won just 16% of the vote.

On August 20, 1991, the republics were to sign a new union treaty, making them independent republics in a federation with a common president, foreign policy and military. However, on August 18, a group of Gorbachev's ministers led by Gennadi Yaneyev, backed by the KGB and military, staged a coup d'état. Gorbachev was held prisoner in his summer residence on the Crimean peninsula (Ukraine), and martial law was declared in Russia on August 19. Large groups of soldiers controlled Moscow, but no politicians were arrested. During this time, Estonia declared its independence on August 20.

Boris Yeltsin and the semi-democratically elected Russian parliament opposed the coup, and the coup makers gave up on August 21, the same day that the third Baltic republic, Latvia, declared its independence. Immediately after the coup had failed, and before Mikhail Gorbachev returned to Moscow, the power vacuum was filled by Boris Yeltsin, Boris Yeltsin immediately signed a decree banning the Communist party throughout Russia, this ban was soon extended throughout the Soviet Union. Thus 70 years of Communist rule effectively came to an end.

To eliminate the distortions of the ACS system and in favor of democratization and capitalism, Yeltsin's shock program, employed days following the dissolution of the Soviet Union, cut subsidies to money-losing farms and industries, decontrolled prices, moved toward convertibility of the ruble, and moved toward restructuring the largely state-owned economy. Existing institutions, however, were abandoned before the legal structures of a market economy that govern private property, oversee the financial market, and enforce taxation were functional, despite the fact that the two major components of a macroeconomy are banking system and the state budgetary system.

According to market economists, the dismantling of the administrative command system in Russia was supposed to raise GDP and living standards by allocating resources more efficiently. It was supposed to create a movement outward towards production possibilities by eliminating of central planning, substituted by decentralized market system, eliminating huge distortions through liberalization, providing incentives through privatization. Instead, over half the population is now impoverished in a country where poverty had been largely non-existent, life expectancy has dropped, and GDP has halved.

China, sustaining one of the world's highest rates of per capita GDP growth over the past two decades, in contrast, has maintained public ownership while avoiding the rigidities of planned economic decision-making since the ascendancy of Deng Xiaoping. Peasants are largely in charge of economic decision-making at the countryside (still home to the majority of China's population), not planners. In turn, they are able to spend their surplus capital on consumer goods. Socialist enterprises at the local level, known as Township and Village Enterprises (TVEs), and state-owned enterprises are also profit-maximizing and thus capable of deciding for themselves the source of inputs, the destination of outputs, the amount of funds geared toward labor allocation, and what to produce. Subsides, however, still prop up many money-losing state-owned enterprises (SOEs) which are often still overseen by planning ministries. While China has not reached the high level of industrialization and urbanization as rapidly as seen in the Soviet Union under Stalin, it seems to be avoiding the Soviet economy's record of poor productivity and rigidity seen since the late 1970s.

Thus, socialism is not necessarily the economic system that failed in the Soviet Union, but rather a system of admistrative command or planned economic decision-making. The more complex the Soviet economy grew under the auspices of the planners, the more unfeasible it simply grew to plan every economic decision in the highly industrialized nation covering such a huge geographical expanse. Planning might have transformed a nation of peasants into an industrial superpower, but it failed to supply all the goods demanded by a population growing accustomed to increasingly better living standards once the economy had achieved a high level of industrial development.